Create A Profitable Online Store In 5 Easy Steps

This article is the start of a 5 part series on how to create a profitable online store. If you’re tired of devoting the majority of your time to your day job and you’d rather set your own hours and be your own boss, the best way to escape from the rat race is to start your own business online.

When my wife became pregnant with our child and decided that she was quitting her job, we managed to create a profitable online store that generated 100k in profits in just over a year.

Today, my wife stays at home with the kids and works just several hours a day on our online business from home!

Starting A Store Or Business Online Is Ideal Because…

You don’t have to be physically present to make money. Your computer can take orders for you even while you sleep.

There is little or no overhead to maintain your website.

Most if not all of the backend software is already written for you. All you have to do is to set things up and customize it.

These days, opening up your own online business is easier than ever thanks to the many services and free software available on the internet. In fact, you can start an online business completely from scratch for as low as 5 dollars a month!

In order to make money online, you have to have goods to sell to the end customer. And to sell goods, you have to have a storefront.

I’m going to show you just how easy it is to open your own online store in 5 easy steps and I will cover these 5 steps in detail in the next 5 posts. In the meantime, I thought that I’d go over the different online store options.

What Are My Options?

When most people think of owning a store, selling and delivering physical goods is usually the first thing that comes to mind. However, shipping physical goods is only one of the many ways to make money with an online store.

Did you know that you can setup up your store such that all you have to do is take orders and have the manufacturer fulfill them for you? Have you ever stopped to consider selling informational products that require no shipping whatsoever?

I’ve outlined below the various ways to make money with an online store along with the pros and cons of each.

Dropshipping

Dropshipping is one of the easiest ways to start an online store without ever having to worry about carrying inventory. Once you have set up an arrangement with a dropship distributor, all you have to do is set up your online store and take orders.

As orders are received, you simply pass the customer information along to the distributor who is then responsible for delivering the actual goods to the end customer.

The profit you make is the difference between your selling price and the wholesale price you’ve negotiated with the vendor.

Dropshipping is one of the easiest ways to make money with very little physical effort on your part. Once you have your store setup, it can almost run on its own.

The negative aspect of dropshipping is that the profit margins are fairly low compared to some of the other store options. The other disadvantage is that you are responsible for making the customer happy even though you have no control over order fulfillment.

Managing customer support is one of the biggest challenges with dropshipping which is why it is essential to choose reliable manufacturers to work with.

Selling Physical Goods With Inventory

This is the most traditional way of making money via an online store. You purchase physical goods from the manufacturer at a wholesale price, stock inventory and ship the goods directly to the end customer.

It sounds like a hassle and it definitely can be troublesome at times, but the profit margins are extremely high compared to dropshipping.

It is because of the high margins that opening up a traditional online store is one of the fastest ways to make a meaningful amount of money in a very short period of time.

The negative aspect of opening a traditional store though is that it involves greater risk because you have to put some of your own money up front to purchase inventory.

Opening up a traditional online store has been an extremely profitable venture for my wife and I. We chose to open a traditional online store because we needed to supplant my wife’s salary in a very short time frame when she quit her job.

In the span of just a year, we were able make 100K in profits from our online wedding linens store and our business continues to grow every year.

Selling Your Own Goods

Not everyone has the intelligence, creativity and aptitude to sell their own goods created from scratch, but those that do so successfully make the most profits of them all.

The hot ticket items to sell online these days are informational goods. Why? It’s because you don’t have to ship anything physical. You can deliver informational products with a simple download once payment is received.

If you have a special talent or possess knowledge that is scarce, selling your own goods is definitely the way to go. Best of all, you get to keep all of the profits.

Selling as an Affiliate

Becoming an affiliate is very similar to being a drop shipper except that you carry no responsibility whatsoever. All you have to do is to refer someone to a product or service.

If that person makes a purchase, then you get a cut of the sale. Once the sale is made, you are out of the picture altogether. Being an affiliate is by far the lowest energy way to make money. Unfortunately, it also carries the lowest profit percentage.

If I were to evaluate the different types of stores based on effort and profitability using a table, here’s what it would look like.

Store Type

Effort Level 1-10(easiest)

Profitability Scale 1-10 (best)

Dropshipping

7

3

Traditional Store

4

7

Selling Your Own Goods

1

10

Affiliate Sales

10

1

As with all things, there’s a direct correlation between effort level and the amount of profit that you can make. With greater risk carries greater rewards and your decision should be based on your own situation.

You also want to consider future scalability of your business. For example, even though dropshipping offers lower profit margins, running a dropshipping store is much easier to scale in the future since you don’t have to worry about inventory.

My wife and I chose a traditional store because we needed to replace her lost income in a fairly short period of time. Plus, we wanted to be in full control of our customer service.

While I know many people who dropship and sell items as an affiliate, the ramp up time to meaningful profits is much longer.

Couldn’t agree more that profitability moves up in relation to effort. I’ve gone 3 of the routes you’ve analyzed (drop shipping, physical inventory, and selling my own product) and you’re right on….Drop shipping was by far the easiest, but as you would expect the least profitable, but it is a good way to get your feet wet. I don’t know about affiliate sales, it seems that if you have a large enough audience to sell to it could be profitable, and with not a lot of work. Of course it takes quite a bit of work to build the initial audience up.

Great, this is great. I have both opened an online store in the shape of an info product and also helped others in the form helping with the online marketing aspect so am keen to read any secrets to your success! Cough ’em up!

I have read through all of your steps in your online store tutorial. I have accomplished (in one way or another) all 5 steps. My question is, how do you create traffic without going into debt by paying for advertising? This seems to be the most difficult thing to do.

Affiliate marketing can also add to your online store profits, by extending your product line or being an upsell, after the transaction is complete. So I might add to your post that your store can be a hybrid of a couple or few techniques to maximize the value of traffic and transactions.

HomeESP is the first to offer a thank you page upsell affiliate program designed for entrepreneurial Websites (using techniques as employed at buy.com, priceline.com, etc., on a much larger scale).

Wanted to congratulate you on having such a great blog. I have found many a good content on this place and real helpful too. Great work! Keep it up.

There are so many ecommerce platforms out there who can help people setup their own online store now. The big ones being Shopify, Volusion, BigCommerce, etc.

For the Indian market in particular, there is one ecommerce platform that is currently doing pretty well. Zepo.in (http://www.zepo.in/). They are helping small businesses and entrepreneurs running on low budget to open online stores. No technical knowledge is required, to setup their online store.

Their prices start as low as Rs. 499/month. They integrate payment gateways to your store, free of cost and also provide logistics support.

As a person who has lost just about everything and has no income, would it be feasible to start out with a drop-shipping type online clothing boutique and then branch out into a traditional online clothing boutique once I have started to turn a profit? Or would you have a better suggestion? Please help I am at a loss. Thanks alot!

I agree whole heartedly with Steve C, here. A very wise, old marketing guru once told me “Don’t ever try to sell anything you regularly buy for yourself.” It was sage advice.

What he meant was, of course, that anything you commonly buy for yourself, such as clothing, are things that practically everyone buys for themselves. So, the markets for such items are absolutely gigantic. This means that if you get into those markets, you’re going to be competing with giants. And, you CAN’T compete with giants. You can’t compete with the likes of Marshall’s or Old Navy. They will crush you — they will crush you into dust, and there’s absolutely nothing you can do about it.

The real trick is to find a niche wherein the market is small enough that the overall potential profits it’s capable of generating are not worth the time, effort and attention of the retail behemoths, but are still large enough to be greatly worth the time of someone looking to start their own, relatively small, internet business.